VAT refunds can be claimed by businesses on eligible expenses within 4 years of purchase or by tourists/non-residents exporting goods within 3 months. Key requirements include being VAT registered (for businesses), having valid invoices, and ensuring goods are unused and taken out of the country.
Refunds must be collected within three months of purchase. Retailers choose whether to participate in the VAT-refund process. Most tourist-oriented stores do; often you'll see a sign in the window or on the check-out counter (if not, ask).
You can reclaim VAT paid on goods or services bought before you registered for VAT if you bought them within: 4 years for goods you still have or goods that were used to make other goods you still have. 6 months for services.
Conditions for tourists to claim their VAT refunds
Other conditions to claim refund include: The tourist must be at least 18 years old. Goods must be purchased from a retailer who is participating in the 'Tax Refund for Tourists' scheme. Goods are not excluded from the refund scheme of the FTA.
A VAT refund lets VAT-registered UK businesses reclaim VAT paid on eligible business expenses, usually at the standard 20% rate. You must be VAT registered (or eligible under the overseas VAT Refund Scheme) and have valid VAT invoices to make a successful claim.
Apply for a VAT refund
Small business owners can claim back VAT on products and services shared between the business and also used personally. If you run your business from home, you can claim back a proportion of VAT on services such as utilities and broadband.
So it's usually high-ticket items, like jewelry or fine clothing, that qualify for a VAT refund, not a paperback novel or suntan lotion. There are also a number of goods and services that are not eligible for refunds, including hotel rooms and meals.
You can reclaim input VAT on purchases that are used for your taxable business activities. This includes purchases used to make standard-rated, reduced-rated, or zero-rated supplies. You cannot reclaim VAT on purchases used solely for exempt activities.
Main Reasons VAT Refunds Are Rejected (And How to Avoid Them)
When compared to the standard VAT rates of other countries within Europe, the countries where you pay the lowest VAT rates are Switzerland, Luxembourg and Turkey. For this reason, the VAT rate for your purchases from these countries will be low. This will mean a reduction in the VAT fees you receive back.
Each VAT return must be submitted usually one calendar month and seven days after the end of the relevant quarter. For example, the VAT return from 1 January to 31 March 2025 must be filed with HMRC by 7 May 2025.
(You are considered an exporting tourist when you purchase goods and take them with you home, therefore becoming eligible for a refund of the VAT that you paid during the purchase.)
Receipts, tax-free tags, passport, credit card, and goods must be shown at validation kiosks or counters. 85% of VAT is refunded after deducting fees; paid via cash (limit AED 35,000) or card. Goods must be unused and carried with the traveller services, food, or used items don't qualify.
Navigating VAT obligations can be particularly complex for online businesses, especially those selling across borders. Common mistakes—such as failing to register in the correct countries, applying the wrong VAT rates, or missing important filing deadlines—can lead to serious financial and legal consequences.
Costs that are out of scope for VAT are outside the remit of the UK VAT system, which means that VAT doesn't apply to them. Examples include: government-imposed tolls, such as MOT certificates, council tax and business rates. staff wages and pensions.
Healthcare: Medical services, hospital care, and the supply of certain medical products may also be exempt from VAT. Financial services: Many financial services, like insurance and banking, are VAT-exempt. Charitable activities: Donations and activities carried out by registered charities may be exempt from VAT.
Usually, your purchase must be over a certain amount in order to qualify for a VAT refund. In the EU, for example, you have to buy at least 175 euros worth of stuff in a shop. European Commission: Taxation and Customs Union. Guide To Vat Refund For Visitors To The EU.
Can I separate my businesses to avoid registering for VAT? The short answer is possibly, but we don't recommend that you risk it unless there are valid commercial reasons.
If you paid more through the year than you owe in tax, you may get money back. Even if you didn't pay tax, you may still get a refund if you qualify for a refundable credit. To get your refund, you must file a return. You have 3 years to claim a tax refund.
Certain business expenses, such as office supplies, equipment, professional fees, and business travel expenses, are deductible for VAT purposes. Non-deductible expenses: Expenses like entertainment, personal expenses, penalties, and fines are not eligible for VAT deduction.
You need to submit a VAT return to HMRC, usually every three months, detailing the VAT you've charged customers (output tax) and the VAT you've paid on purchases (input tax). The difference between these amounts is what you owe to HMRC or can reclaim.